The job market in the United States has fully recovered, favoring the travel and shipping industries

Since last month, the US labor market has fully recovered the number of jobs lost due to the pandemic, in less than half the time it took after the previous downturn. A whopping 528,000 jobs were added in July, pushing the total payroll count above the February 2020 level.

However, good news can be bad news in this case, as the hit jobs report could prompt the Federal Reserve to tighten more aggressively than expected to dampen growth. This could decisively trigger the recession that many market watchers believe we have already entered, with real gross domestic product (GDP) shrinking for two straight quarters, inflation hitting near-historic highs and a services sector in contraction.

Additionally, U.S. yields reversed to the lowest level since 2000. On Friday, the yield on the two-year government note closed at 3.24%, the 10-year at 2.83%, a difference of 41 basis points. Every recession in recent decades has been preceded by an inversion of the yield curve, so we may be at the very end of the economic cycle.

It will be interesting to see what Jay Powell & Co. decides to do at the next meeting of the Federal Open Market Committee (FOMC), scheduled for September 20-21.

Americans are reducing their driving, but lower fuel costs could be a game-changer

Another sign that parts of the economy may be slowing down? Lower fuel demand associated with lower gasoline prices. Data from the Energy Information Administration (EIA) shows Americans are consuming less gas per day this summer than they did in the summer of 2020, when nearly everyone was stuck at home gorging themselves tiger king on Netflix.

Gas prices above $5 a gallon, it seems, are more of a deterrent to venturing outside your home than Covid fears and government-mandated lockdowns.

The decrease in driving activity is consistent with the results of a recent survey conducted by the American Automobile Association (AAA). The nonprofit found that a whopping 88% of Americans were driving less due to rising gas prices. Three-quarters of respondents said they combine shopping with each trip, while 56% said they are reducing shopping and eating out.

Interestingly, only 13% of people who responded to the survey said they were driving a more fuel-efficient vehicle in response to the spike in gas prices; virtually no one, 2% of respondents, said they were switching to an electric vehicle (EV).

The EIA will release last week’s fuel consumption figures on Wednesday, and I expect to see demand rebound above 2020 levels now that gas prices have fallen for more than 50 consecutive days. after peaking at a record national average of $5.02 on June 14.

For many Americans, the holidays will be ‘no matter what’

Another recent survey, this one by McKinsey & Co., shows that many Americans are still planning a vacation this summer “no matter what,” even though inflation remains a major concern. Nearly 70% of respondents said they go on a trip regardless of rising prices, Covid, a potential economic downturn or other concerns.

That positive sentiment was echoed by Booking Holdings CEO Glenn Fogel, who told CNBC this week that Americans “are going to continue to travel and they’re going to travel more and more for the long haul.”

Fogel joined the network to discuss Booking’s incredible second quarter financial report. The online travel agency, which owns well-known brands such as Priceline, Kayak and OpenTable, saw more overnight bookings in the three months ending June 20 than in any quarter of 2019, before the pandemic. Total revenue was $4.3 billion, nearly double what it was in the prior quarter, while net profit was $857 million, compared to a net loss in the same quarter last year. last year.

Looking ahead, Fogel expects record third-quarter revenue, and bookings for the last quarter of the year are currently around 15% higher than the same period in 2019.

We’re bullish not just on Booking, but also on our rivals Tripadvisor and Expedia, whose stocks recouped their losses, and more so as gasoline prices retreated from all-time highs on June 14.

Shipping Giant Maersk posts record results

In addition to consumers, lower gas costs benefit industries that consume large quantities of petroleum-based liquid fuels. These include airlines and shipping container companies, with the latter still seeing worsening congestion at ports in North America, Europe and China, according to shipping giant AP Moller-Maersk. .

The world’s second-largest shipping company is often seen as a barometer of the global shipping industry, and if that’s the case, Maersk’s second-quarter results should reassure investors. The Copenhagen-based company posted record revenue of $21.7 billion in the June quarter and net profit of $8.6 billion, also a new quarterly record.

Based on these impressive results, Maersk is raising its full-year guidance from $30 billion EBITDA (earnings before interest, taxes, depreciation and amortization) to $37 billion. It also increased its free cash flow (FCF) estimate from $19 billion to “above” $24 billion. Maersk’s board is also increasing the company’s share buyback program to $3 billion for the years 2022-2025, from $2.5 billion previously.

Some financial media have drawn attention to the fact that Maersk moved 7.4% fewer containers in the second quarter compared to the same quarter last year, but as the company itself points out, this is due to increasing port congestion, not a significant slowdown. required. According to the Census Bureau, new orders for manufactured durable goods reached $272.6 billion in June, up 2% from May. Shipments of manufactured goods also increased by 13 of the last 14 months in June.

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